The most common and most likely answer to this crossword clue is the 3 plus 2 plus 3 plus 4 letter word FLY ON THE WALL
I've seen this crossword clue in The Guardian
F
L
Y
O
N
T
H
E
W
A
L
L
Buddy explains!
The straight part
We know that "Observer who’s not seen" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case observer who’s not seen = fly on the wall.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.